TAX POLICY FOR CAPITAL CONTRIBUTION AND CAPITAL RECEIPT – OFFICIAL LETTER 32670
Official Letter No. 32670/CTHN-TTHT (“OL 32670”) of the Hanoi Tax Department, regarding tax policy for capital contribution and capital receipt in case a company receives capital contribution from individuals by trademark ownership and transfer of trademark ownership from individual to company in accordance with the Law on Intellectual Property was issued on July 11, 2022, the tax obligations of a company and an individual are as follows:
Legal basis cited:
- Article 1, Law on Intellectual Property No. 36/2009/QH12 amending and supplementing a number of articles of the Law on Intellectual Property (“LIP”).
- Article 36, Law on Enterprises 2020 (“LOE 2020’) provides for valuation of contributed assets.
- Article 50, Law on Tax Administration No. 38/2019/QH14 provides for tax liability imposition in case of tax violations.
- Article 4.21, Circular No. 219/2013/TT-BTC of the Ministry of Finance guiding on goods and services that are not subject to VAT.
- Articles 2.3 and 10, Circular No. 111/2013/TT-BTC of Ministry of Finance on the implementation of the law on personal income tax, the law on the amendments to the Law on Personal Income Tax.
- Articles 2 and 5, Circular No. 96/2015/TT-BTC of the Ministry of Finance guiding for corporate income tax.
- Articles 2.2, 3 and 11, Circular No. 45/2013/TT-BTC 2015 of the Ministry of Finance guiding regulation on management, use and depreciation of fixed assets.
Guidance of the Hanoi Tax Department:
The transfer of intellectual property rights under the regulation of the LIP is not subject to VAT.
The time to determine the taxable income of PIT on the income of capital investment is when the organization or individual pays such income to the taxpayer. In such a case, at the time of capital contribution, the individual has not been paid income from capital investment, and the PIT obligation from capital contribution has not yet arisen.
A company which accepts new investors according to regulations, of which assets after capital contribution are determined to be owned by the company and added to the business operating capital, it shall not be included as taxable income for CIT calculation purposes.
The valuation of assets contributed as capital shall comply with regulations of Article 16 of the LOE 2020. If the capital in assets are determined to be intangible fixed assets according to regulations, the company must amortize the intangible fixed assets as prescribed in Circular No. 45/2013/BTC of the Ministry of Finance.
If the assets contributed as capital are not valued at market price, the taxpayer is subject to tax imposition as prescribed in Article 50 of the Law on Tax Administration.